How did 2018 perform?

The calendar year 2018, noted flat returns on a year-over-year basis. Borrowing excitement from the previous year, 2018 began with cheerfulness, as the benchmark indices touched lifetime highs frequently, in the early months. However, it could not sustain these levels. As a result, these indices are expected to enter 2019, with flat to single-digit returns.

With Sensex and Nifty climbing around 28 per cent each, in 2017, it was expected for the Indian stock market to give single-digit returns in the current year, considering the uncertainty caused by crude and rupee volatility, US-China trade war, state assembly elections and unexpected resignation of RBI governor.

The fund managers, however,  indicated towards a negative close for the broader market, as most of the fund management and PMS schemes are dipped in red. Large-cap funds fell by 4 per cent on an average in 2018, whereas the top mid-cap and small- caps are also down more than 30-40% from their year high. Reintroduction of the Long Term Capital Gain (LTCG) Tax and the Infrastructure Leasing & Financial Services Ltd (IL&FS)triggered liquidity crisis could be the most relatable reason for the same.

Most asset classes, including gold, remained volatile throughout the year, owing to global macro factors and geopolitical tensions. Gold has given a return of around 9 per cent. Real estate, on the other hand, has given flat returns in the current year. Overall 2018 has been a year of consolidation for indices and correction for top mid-cap and small-cap correction.

How will Lok Sabha Elections 2019 Impact the Indian Stock Market?

In the coming April or May 2019, India will be voting to constitute its 17th Lok Sabha. In the run-up to the general elections, the market is filled with anxiety and expectations. So next year we are expecting a year of volatility for the Indian stock market.

Investors have always been in favour of a stable government and sustainable economic growth. Elections have a short-term impact on the market, but it is the government policies and economic growth that is more important in the long run. Also, global cues will continue to impact the Indian stock market, before and after the elections. So we should keep one thing in mind that regardless of which party would come in power, after initial reactions, Indian market would continue to follow global trends.

If the voters give their verdict in favour of the ruling Bharatiya Janata Party (BJP), it will be a piece of positive news for the market. And if the government is formed by another party or there is a hung parliament, the market may witness a crash, in near future.

How will Nifty perform in 2019?

Nifty has a clear resistance around 10900-11200 and strong support around 9900-10000 level. If Nifty closes above 11200 on monthly basis, then only this downtrend would be finished and Nifty will continue to move upwards. Till then we expect downside to remain open for Nifty. Also if nifty closes below 10000 mark on a weekly basis, Then target for nifty is 9000-9200  which is a trendline support of the year 2015-16 high as shown in the graph, where we see strong bottom for Nifty to take place.

How will Nifty perform in 2019?

Banknifty has resistance at 27050-27250 and support at 23600-24000 zones. If Banknifty closes above 27000 level on monthly basis then we could see a big upside rally in Banknifty for next year. Similarly if banknifty closes below 23600 on weekly basis then we are expecting target of 21500 which is the trend line support of the year 2015-16 high, where banknifty should make a bottom.

Domestic Liquidity and Buying Opportunities

The year 2018 has indicated a very important phenomenon. The Indian market has been flat this year despite heavy withdrawal by the Foreign Institutional Investors (FIIs). The void created by the FIIs were filled by the Domestic Institutional Investors (DIIs) and Mutual Funds (MFs), balancing the act of the former.

FIIs have been the principal mover of the Indian market, for many years. FIIs have huge investments and their actions have been a prime factor in deciding the direction of the market. DIIs, on the other hand, have been the followers of trail formed by the FIIs. Since 2017, a trend reversal has been noticed and it continued in the current year 2018.

Foreign Institutional Investors (FIIs) have ditched the Indian capital market this year, withdrawing a whopping INR 87000 cr, the highest ever. FIIs have assumed to take out funds from the Indian market because of depreciating rupee and possible rate hike by the Federal Reserve, expecting a better return. Other reason could be the imposition of Long Term Capital Gain Tax (LTCG) and uncertain geopolitical condition.

DIIs and MFs have saved the markets from a potential bloodbath by consuming the entire selling, which kept the indices in the green zone on a year-to-date basis. This indicates towards domestic liquidity which is ready to consume the excessive selling (in case) by the FII.

In worst case scenario, if the Foreign Institutional Investors(FIIs) sold off heavily or we have some uncomfortable news in General Elections 2019, like the formation of a hung parliament or likewise, the NIFTY might come down to the level of 9200. This would provide the investors with a golden opportunity to buy in a big way.

Which sectors will perform well in 2019?

The US-China trade war is heating up by the day, despite the temporary truce between the two. revision of the global GDP growth estimate by the IMF and other geopolitical tensions picking up has kept the market volatile for the major part of the year 2018. This volatility will continue in the near future, especially in 2019.

The initial months of the year 2019, are expected to be driven by news and events. Any positive news in the individual sector can turn it green and vice versa. The matters like growth rate and stable economic policies would be the key in the later months of the year.

On the sectoral level, we are bullish on pharma sector and we are expecting good returns from this sector. Upcoming government’s favourable plans in relation to infrastructure and railways would be something that investors look forward to. IT, Oil/Gas sector is expected to consolidate and likely to provide buy on dip opportunities for the investors.

Conclusion:

• Nifty is still in correction mode. If it closes above 11200 on monthly basis then we can see new highs next year.  In worst case scenario, Nifty may come to 9200 levels, If closes below 10000 mark on a weekly basis.
• The liquidity level in the market is high, waiting for a correction. Liquidity is, therefore, in favour of the market.
• It is going to be a tough call for the investors to decide the level at which they should invest, as we do not know how much of their investment is already stuck in the market. However, we suggest that one should be ready with more investment amount and should invest as per the levels we have mentioned in our analysis.